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BUS 630 Week 4 DQ 2 Critiquing a Cost Report

BUS 630 Week 4 DQ 2 Critiquing a Cost Report

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BUS 630 Week 4 DQ 2 Critiquing a Cost Report

Complete the following exercise: Frank Weston, supervisor of the Freemont Corporation's Machining Department, was visibly upset after being reprimanded for his department's poor performance over the prior month. The department's cost control report is given below:
"I just can't understand all the red ink," Weston complained to the supervisor of another department. "When the boss called me in, I thought he was going to give me a pat on the back because I know for a fact that my department worked more efficiently last month than it has ever worked before, instead, he tore me apart. I thought for a minute that it might be over the supplies that were stolen out of our warehouse last month. But they only amounted to a couple of hundred dollars, and just look at this report. Everything is unfavorable." Direct labor wages and supplies are variable costs; supervision and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $92,000; the fixed component of the budgeted utilities cost is $11,700.

Freemont Corporation-Machining Department

 

Cost Control Report

 

For the Month Ended June 30

 

 

Planning Budget

Actual Results

Variances

 

Machine-hours

35,000

38,000

   
         

Direct labor wages

$80,500

$86,100

$5,600

U

Supplies

21,000

23,100

2,100

U

Maintenance

134,000

137,300

3,300

U

Utilities

15,200

15,700

500

U

Supervision

38,000

38,000

   

Depreciation

80,000

80,000

   

Total

$368,700

$380,200

   

 

  • Evaluate the company's cost control report and explain why the variances were all unfavorable.
  • Prepare a performance report that will help Mr. Weston's superiors assess how well costs were controlled in the Machining Department.

Respond to at least two of your fellow students’ postings.

 

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